Finance: Lending Made Easy

If you own a small business and have tried to get a loan in recent years, you probably know frustration like the back of your hand.

Now that the economy has improved, small businesses have seen an easing of the tight credit that hindered expansion plans during the Great Recession and beyond. And banks, flush with money, are eager to do more business with the rapidly growing small-business sector. But banks still confront low-net-interest margins that continue to depress earnings, putting more pressure on them to look for ways to cut costs.

“The way lenders are going to market today is the same way they have gone to market for the past 30 years,” says Jeremy Hill, CEO of Captivion, a Bellevue-based startup. “That’s horribly expensive.” Captivion has come up with a simplified “matchmaking” system that makes it cheaper and easier to match small borrowers with the bank most likely to offer a loan.

Meanwhile, Seattle-based Booyami, which launched in 2010, offers software that takes a snapshot of the finances of small businesses and offers those firms a way to get a real-time analysis of that data.

Captivion and Booyami have both been successful signing up clients and are looking to use technology to transform how banks and small businesses interact.

Hill says small businesses can think of Captivion as a sort of Match.com connecting small businesses with lenders. Its software uses algorithms to match small and midsize businesses with a group of verified lenders, boiling down to a few minutes a loan application process that often may take months.

Businesses seeking loans can plug in their data on Captivion’s website (captivion.com). The software weighs several factors, including the company’s location, type of business, loan amount requested and whether the would-be borrower is seeking a commercial or real estate loan.

Captivion works with banks, credit unions and alternative lenders, including Heritage Bank, Washington Federal, Foundation Bank and CBC Partners. Captivion does not charge a fee to small businesses seeking loans. Instead, it receives a finder’s fee from lenders eager for a service that helps cut the cost and time to vet worthy borrowers.Hill says larger banks are moving to larger business clients, leaving smaller businesses with fewer options for loans. Captivion targets small businesses seeking loans of $100,000 to $5 million.

Hill, a serial entrepreneur and managing director of JB Capital Management, believes small-business lending represents a significant opportunity because there are more than 500,000 small businesses in Washington state. In 2013, he notes, those firms took out 82,000 new small- business loans totaling $4.5 billion.

If captivion works like Match.com, Booyami is like Carfax. Mike Milan, Booyami’s SVP of sales and marketing, says Booyami helps small- business owners get a clear picture of the financial state of their companies and what they need to do to make themselves more attractive to lenders. Lenders can see which companies are most worthy of loans, in much the same way that Carfax helps used-car buyers find the perfect car for them.

Founded by James Walter, a former Microsoft executive, and Corey Ross, a former executive at Banner Bank and Bank of America, Booyami has raised more than $2 million from investors, including a $1.2 million funding round in September. It also acquired Seattle-based BBI Financial, which offers education and training for bankers and small-business owners.

Booyami operates two entities, BBC Easy (bbceasy.com) and Finagraph (finagraph.com). BBC Easy’s service streamlines the borrowing process by tapping directly into a company’s accounting software and doing the busywork of calculating borrowing base certificates (BBCs), which are forms borrowers must regularly complete to comply with a lender’s requirements. Clients log in and BBC Easy prepares the reports and calculates the BBCs based on the lender’s requirements and the data in the accounting system. The business submits the data, the lender reviews it and the BBC process is complete. Finagraph is a companion software service that gives the user financial intelligence on demand. With Finagraph, business owners can press one button and have real-time business intelligence drawn from five years of their financial history, including income statements and balance sheets, Milan says.

Finagraph allows owners to analyze their businesses the way a bank or investor might, comparing a company to other businesses in the same industry, for example. Business owners can see in real time the financial impact of, say, carrying too much inventory. “If your business is having a cash flow problem and having problems making payments,” Milan explains, “it could be you that are putting too much cash on the shelf.”

Milan sees a big underserved market in the small-business sector, which he considers to be a huge engine in the economy. But he says these owners need the right tools to help them make better financial decisions. Adds Milan, “Letting business owners see behind the curtain lets them go beyond worrying about ‘did I provide good customer service’ to ‘do I understand how much debt I have?’”

The loan officer: An endangered species?

If the University of Oxford is right, the coming years may see many more companies like Captivion and Booyami introducing innovation to the bank lending field. A 2013 study by the university concluded that, of the 702 United States occupations most vulnerable to being replaced by computers or robots, the venerable loan officer was near the top of the list, right next to watch repair and hand sewing. Loan officers, the study concluded, have a 98 percent chance of being phased out over the next 10 years thanks to software that can instantly collect and sort relevant financial data and determine the qualifications of a potential loan candidate. Accountants and auditors face a 94 percent chance of being phased out by automation, according to the study.